Sainsbury's boss says corporate tax row is a question of morality not legality

Justin King warns business leaders that companies with aggressive tax arrangements face boycotts from consumers

Justin King, the chief executive of Sainsbury's, says firms that defend their tax affairs by saying they operate within the law are unlikely to win trust on the issue. Photograph: Martin Godwin for the Guardian
Martin Godwin/Guardian

Sainsbury's chief executive, Justin King, has challenged senior business leaders and fellow retailers over the UK corporation tax furore by arguing that the issue is a question of morality, not legality.

He criticised companies that argued they paid enough tax legally and said there was no moral high ground in making such statements. The boss of the UK's third-biggest supermarket also warned that companies with aggressive tax arrangements faced a boycott from consumers who view tax from an ethical standpoint.

Speaking at the British Retail Consortium's annual symposium of business leaders on Tuesday, he said: "Tax is a moral issue, I would argue. Every business in a position of trust should be able to stand up and try to explain why they arrange their affairs the way they do if they believe they have nothing to hide.

"Trust is a moral issue and you can't claim to hold a trustworthy space on any issue, including tax, by just saying 'I'm operating within the law' because it is not a good enough articulation to win trust."

His comments are at odds with several companies, business leaders and organisations. Last month, Sir Roger Carr, head of the Confederation of British Industry, said: "Tax payments are not, and should not be … a payment viewed as a down payment on social acceptability, or a contribution made by choice in order to defuse public anger or political attack."

Google has also faced major criticism over its tax position, arguing that tax was "a matter of following the laws".

But King said on Tuesday: "Of course we all operate within the law. It's shocking that anybody would think saying we operate within the law does anything other than confirm what every consumer believes to be true."

Last week Starbucks paid its first corporation tax in the UK for five years, after customers and politicianscriticised the coffee chain for its complex tax structure. It said: "We listened to our customers in December and so decided to forgo certain deductions, which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014. We have now paid £5m and will pay the remaining £5m later this year."

Starbucks did not say how many customers were lost, but rival Costa has reported an increase in business recently. Few business leaders have followed King's tough stance on tax or called it a moral issue, with many fearing it could result in their firm's tax affairs coming under scrutiny. But Andy Street, managing director of John Lewis, criticised Amazon's tax arrangements last year and urged the government to act, saying: "It's to do with what our customers expect around a fair and level playing field and I suspect our customers do think both companies should be treated in the same way."

He also warned that the high street could be decimated if the issue of tax was not tackled.King also believes that the disparity between the high street and internet-only retailers has created an unfair advantage for the likes of Amazon, because of high business rates for bricks-and-mortar stores.

He said: "Business rates has been a good model for 500 years but the world is changing. Therefore, we are going to have to find a different way of raising tax for local distribution because at the moment tax is tipping the playing field away from businesses that cite themselves locally."